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Endogenous Skill Bias in Technology Adoption: City-Level Evidence from the IT Revolution

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  • Paul Beaudry
  • Mark Doms
  • Ethan Lewis

Abstract

This paper focuses on the bi-directional interaction between technology adoption and labor market conditions. We examine cross-city differences in PC-adoption, relative wages, and changes in relative wages over the period 1980-2000 to evaluate whether the patterns conform to the predictions of a neoclassical model of endogenous technology adoption. Our approach melds the literature on the effect of the relative supply of skilled labor on technology adoption to the often distinct literature on how technological change influences the relative demand for skilled labor. Our results support the idea that differences in technology use across cities and its effects on wages reflect an equilibrium response to local factor supply conditions. The model and data suggest that cities initially endowed with relatively abundant and cheap skilled labor adopted PCs more aggressively than cities with relatively expensive skilled labor, causing returns to skill to increase most in cities that adopted PCs most intensively. Our findings indicate that neo-classical models of endogenous technology adoption can be very useful for understanding where technological change arises and how it affects markets.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12521.

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Date of creation: Sep 2006
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Handle: RePEc:nbr:nberwo:12521

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References

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Citations

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Cited by:
  1. Michelle Connolly & James Prieger, 2009. "Economics at the FCC, 2008–2009: Broadband and Merger Review," Review of Industrial Organization, Springer, vol. 35(4), pages 387-417, December.
  2. Joern Rattsoe and Hildegunn Ekroll Stokke, 2009. "Wage inequality, comparative advantage and skill biased technical change in South Africa," Working Paper Series 9909, Department of Economics, Norwegian University of Science and Technology.
  3. Chris Forman & Avi Goldfarb & Shane Greenstein, 2009. "The Internet and Local Wages: Convergence or Divergence?," NBER Working Papers 14750, National Bureau of Economic Research, Inc.
  4. Stephen Nickell & Jumana Saleheen, 2008. "The impact of immigration on occupational wages: evidence from Britain," Working Papers 08-6, Federal Reserve Bank of Boston.
  5. Christian Dustmann & Albrecht Glitz & Tommaso Frattini, 2008. "The Labour Market Impact of Immigration," CReAM Discussion Paper Series 0811, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  6. Moretti, Enrico, 2010. "Local Labor Markets," IZA Discussion Papers 4905, Institute for the Study of Labor (IZA).
  7. Hashmi, Aamir Rafique, 2007. "Intangible Capital, Barriers to Technology Adoption and Cross-Country Income Differences," MPRA Paper 5729, University Library of Munich, Germany.
  8. Jeremy Gerst & Mark Doms & Mary C. Daly, 2009. "Regional growth and resilience: evidence from urban IT centers," Economic Review, Federal Reserve Bank of San Francisco, pages 1-11.
  9. Liao, Wen-Chi, 2010. "Outsourcing and computers: Impact on urban skill level and rent," Regional Science and Urban Economics, Elsevier, vol. 40(2-3), pages 136-154, May.
  10. Joseph P. Kaboski & Trevon D. Logan, 2011. "Factor Endowments and the Returns to Skill: New Evidence from the American Past," Journal of Human Capital, University of Chicago Press, vol. 5(2), pages 111 - 152.
  11. Susanto Basu & John G. Fernald, 2009. "What do we know (and not know) about potential output?," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 187-214.
  12. E. et al. Saltari, 2011. "The impact of ICT on the Italian productivity dynamics," Working Papers 149, University of Rome La Sapienza, Department of Public Economics.
  13. Edward L. Glaeser & Matthew G. Resseger & Kristina Tobio, 2008. "Urban Inequality," NBER Working Papers 14419, National Bureau of Economic Research, Inc.
  14. Roc Armenter & Francesc Ortega, 2007. "Credible redistributive policies and migration across US States," Economics Working Papers 1022, Department of Economics and Business, Universitat Pompeu Fabra.
  15. Robert G. Valletta, 2006. "Computer use and the U.S. wage distribution, 1984-2003," Working Paper Series 2006-34, Federal Reserve Bank of San Francisco.
  16. Richard Dion & Robert Fay, 2008. "Understanding Productivity: A Review of Recent Technical Research," Discussion Papers 08-3, Bank of Canada.

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